How Much Does an LLC Cost in Texas? (Filing Fees Breakdown)
The cost of forming an LLC in Texas may vary based on several factors like the LLC type and the filing method chosen.
Having helped numerous entrepreneurs navigate the intricacies of starting a business, I conducted thorough research to demystify the costs of forming an LLC in Texas.
Over an extended period, I examined the filing fees and regulations to provide you with a comprehensive breakdown.
In addition to my expertise, I consulted with industry professionals to ensure accuracy and reliability.
This blog post explores the costs of starting an LLC in Texas, including necessary and optional expenses.
Quick Summary
- Forming an LLC in Texas includes a name reservation fee of $40, a filing fee of $300 for the Certificate of Formation, and optional expenses like a registered agent service
- Texas LLCs are subject to an annual franchise tax based on annual receipts, with exemptions for businesses earning less than $1.18 million
- Additional costs may apply for foreign LLCs operating in Texas, including registration fees, franchise taxes, and compliance fees
Formation Costs or Expenses For Texas LLCs
When opening a limited liability company in Texas, you will be able to dodge some expenses, but some you will have to cover.
There is no such thing as forming an LLC for free because you must pay the state filing fee, the minimum requirement to be legally recognized as a business entity and conduct business in the state.
1. Name Reservation Fees
When forming a Limited Liability Company (LLC) in Texas, it is important to consider the name reservation fees. Texas imposes a nominal fee of $40 for reserving a name for an LLC.
This lets you secure a business name before filing the necessary formation documents. The name reservation fee aids in ensuring that your chosen name remains available during the registration process.
See our article on how to change an LLC name in Texas.
2. Texas LLC Certificate Of Formation
The Certificate of Formation in Texas is the same document as the Articles of Organization in other states. It represents a document that records the LLC name and its principal business address and purpose.
Without it, the business is not legally recognized in the state, and the LLC formation process can't be completed.
The cost for filing this document is $300. You pay the filing fee to the Texas Secretary of State only once, so you don't have to worry about filing the Certificate of Formation annually.
Additionally, a certified copy of the Certificate of Formation can be obtained for an additional fee of $30.
3. A Texas Registered Agent Service
To establish a domestic Texas LLC, it is essential to have a registered agent located in Texas. The typical range of registered agent service costs between $100 and $300 per year.
A registered agent or a registered agent service ensures your company files and pays all required taxes. A Texas registered agent has to be a physical person or an entity.
With registered agent services, you can sign up for a service that will provide access to digital filing and payment systems, as well as receive important legal announcements from the Texas Secretary of State on your company's behalf.
Texas law requires all LLCs to have a registered agent.
Note: You can be your own registered agent without hiring a third-party agency.
4. Annual Report
Once you set up your LLC in Texas alongside your registered agent, ongoing costs need to be covered to keep your LLC in good standing.
When filing your LLC annual report with the state, these costs are typically paid online through an e-service portal on the Texas Secretary of State's website.
There is no fee for the annual report, but keep in mind that it has to be submitted through the Texas Comptroller of Public Accounts no later than May 15th. If you fall behind with the Texas LLC annual report, there is a $50 fine.
On top of these standard cost items, there may be additional business tax requirements, like franchise tax.
5. Annual Franchise Tax
In Texas, the Annual Franchise Tax for LLCs is calculated based on annual receipts. Businesses with receipts less than $1.18 million are exempt from the franchise tax [1].
However, for businesses giving an annual receipt of $1.18 million to $10 million, a franchise tax rate of 0.375% applies. The maximum tax rate for LLCs in Texas is 0.75%.
Optional Expenses For Texas LLCs
Depending on how you set up the business, some Texas LLC costs can be optional. In addition, a limited liability company that plans to provide a professional service or services will likely have to cover additional expenses, like permits and licenses.
1. LLC Operating Agreement
Operating agreements are legal documents that set forth the LLC's business practices and rules, including how profits are distributed among members. Operating agreements can be a valuable tool for Texas LLCs because they allow you to bypass state laws by drafting your terms of operation.
When developing a company agreement, remember that it must include specific items according to Texas law.
In Texas, the cost of an LLC operating agreement is approximately $478.75.
It is not mandatory to have an operating agreement, but it can be very beneficial. If you do not have an operating agreement, the default provisions of Texas law will apply to your LLC.
You can draft an operating agreement by yourself if you have experience in these matters or download the draft online. If you use one of these, you can create a legal and binding LLC agreement.
However, if you're not sure about the provisions that you need to include, seek legal advice and let a lawyer draft your operating agreement for you. Remember that it will probably cost more than using one of these templates.
2. Expedited Processing
When filing your Certificate of Formation with the Texas Secretary of State, you can opt for expedited processing that shortens the period of time that your Certificate is being processed to only a few business days. The expedited processing fee is $25.
3. Licenses And Permits
You'll need different types of permits and licenses to operate your business legally in Texas, but the requirements and costs will vary depending on your location [2].
Standard business operating licenses or specialized licenses typically range from $15 to $30 for lower-end fees [3]. However, certain businesses may face relatively higher fees, particularly those considered 'vice'-based.
Some licenses are free to obtain, while others can cost up to a few thousand dollars.
Amending Articles Of Organization
If there is any change to your LLC, such as a different management structure or a change in your LLC registered agent, you will need to amend your Articles of Organization.
Like most business filings in Texas, this process is a relatively simple one and can be done by filing the Amendment with the Texas Secretary of State's office along with $15 for each Amendment made.
Expenses For a Foreign LLC
A Texas foreign LLC may incur various expenses when establishing and operating its business.
The fees and expenses of applying for a foreign LLC in Texas are $750. These expenses typically include registration fees, franchise taxes, and potential legal or consulting fees for compliance purposes.
Keep in mind that the additional cost for LLCs may still apply to foreign LLC entities too.
Related Articles:
- What is a Texas Series LLC
- Remove a Member From an LLC in Texas
- How Long Does It Take to Get an LLC in Texas
FAQs
How Much Does It Cost to Get an Ein Number in Texas?
It costs $0 to get an EIN in Texas. You can apply for it via the IRS website. The application is straightforward and can be completed online. It's important to note that this information is specific to Texas and may vary in other states.
Is Texas Subject to Federal Tax?
An LLC in Texas is subject to federal income tax. A single-member LLC is treated as a sole proprietorship and reports its federal taxes (income and expenses) to the IRS on Form 1040. A multi-member LLC reports its income and expenses on Form 1065.
How Much Does It Cost to Open a Business Bank Account For a Texas LLC?
It costs $0 to open a business bank account for a Texas LLC. However, some banks demand an opening deposit ranging from just a few dollars to a few hundred dollars.
Are Texas LLC Owners Liable for the Business Debts?
Texas LLC owners are not liable for the business debts. A business owner of an LLC in Texas has full liability protection against his business debts and claims.
Can an LLC have a DBA in Texas?
An LLC can have a DBA in Texas. However, the Texas LLC filing fee for a DBA will cost a general fee of $25 but depends on the county where you form an LLC.
How Much Is a Single-Member LLC in Texas?
A single-member LLC in Texas costs $300 for the Certificate of formation. The fee covers the same expenses as any other type of LLC. Other expenses can be lower than with other entities, especially regarding taxes.
Does an LLC Have to Be Represented by an Attorney in Texas?
An LLC doesn’t have to be represented by an attorney in Texas. However, it is always a good idea to have legal representation for any company you are starting because the laws can be complex and difficult to understand without education in business law.
Is Forming a Texas LLC Worth the Cost?
Forming a Texas LLC can be a worthwhile investment for various reasons. It protects limited liability, safeguarding personal assets from business debts and obligations. It applies even when you are a foreign LLC.
Additionally, it offers potential tax benefits and allows for a formal business structure. By forming an LLC, individuals may gain credibility and professionalism, attracting potential partners or investors.
While there are costs associated with forming and maintaining an LLC, the long-term advantages often outweigh the expenses.
Consulting with an top LLC formation services in Texas can provide personalized guidance in evaluating whether forming a Texas LLC aligns with your budget. It's also helpful when dealing with government entities such as the Texas Secretary of State.
References:
- https://www.investopedia.com/articles/personal-finance/101415/taxes-texas-small-business-basics.asp
- https://gov.texas.gov/uploads/files/business/Texas_Licenses_Permits_Guide.pdf
- https://www.forbes.com/advisor/business/business-license-texas/
